By Heini Järvinen

The United States Patent and Trademark Office (PTO) has granted Facebook a patent which could allow “authenticating an individual for access to information or service based on that individual’s social network.” The main use for this technology is to allegedly prevent members of a network from sending spam to other members with whom they aren’t legitimately connected. It could, however, also be used by lenders, to let a borrower’s social network connections determine his or her credit worthiness.

The patent describes the technology that could potentially be used for evaluating credit risks:

“In a fourth embodiment of the invention, the service provider is a lender. When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorized nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.”

If used for this purpose, the patented technology could help lenders discriminate against certain borrowers. It’s obviously questionable if having friends with bad credit scores is a valid criterion to assume a person is a bad credit risk, but it’s probable that some banks would nevertheless appreciate this addition to their loan review process. Using this technology for evaluating loans would be particularly harmful for those who have limited or no access to banking services, or those with previous problems with their credit history, and it could push them for more expensive and risky alternatives.

It’s not clear if Facebook’s intention is to ever try to use the patent for lending, and the legality of using it for such purpose is also unclear. In the US, the Equal Credit Opportunity Act defines strictly what information can and cannot be used to determine loan risks, and accessing an individual’s credit report without his or her consent to investigate the credit risk of another individual might not be a legitimate reason.

Facebook and Your Credit (05.08.2015)
http://pubcit.typepad.com/clpblog/2015/08/facebook-and-your-credit.html

Facebook patents technology to help lenders discriminate against borrowers based on social connections (04.08.2015)
http://venturebeat.com/2015/08/04/facebook-patents-technology-to-help-lenders-discriminate-against-borrowers-based-on-social-connections/

Facebook patent: Your friends could help you get a loan – or not (04.08.2015)
http://money.cnn.com/2015/08/04/technology/facebook-loan-patent/

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